The Basics of Business Ethics

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Description of the case: Collapse of Rana Plaza

On 24 April 2013, more than 1100 people were killed and another 2438 injured in a factory collapse in Sabhar, Bangladesh. (Disaster in Bangladesh, 2013) The cause of the collapse was quickly questioned in the media and the reason was serious: one day before the collapse, the industrial police had found cracks in the building and banned access. Unfortunately, industrial police’s crucial decision which could save thousands of lives and prevent huge tragedy was ignored. (Building Collapse in Bangladesh, 2013) The owner of Rana Plaza building (Sohel Rana) and the factory’s managers instructed the employees to enter this crumbling building and continue working. Employees were shocked, tried to express their fear but managers did not pay attention and threatened to cut the month’s salary of employees, so workers could not act against the will of their employer as wage cut would result in starvation and not being able to pay for housing. (Why Won’t We Learn, 2018)

But what was the reason for collapse? Emdadul Islam, chief engineer of the state-run Capital Development Authority, explained to journalists that local authorities gave Mr. Rana permission for a five-story building. However, the owner decided to create bigger space to increase the volume of production, so three additional stories were built. This action was illegal, of course, but no reaction of local authorities followed because Sohel Rana was influential person and had certain connection with politicians. (Reason and responsibility, 2013)

Moreover, after the collapse experts concluded that initial five-story building was made from materials of inadequate quality and building process regulations were not taken into account. So, it seems logically that this construction project should have been stopped by local authorities and state engineers from the early beginning, however, Mr. Rana gave bribes, so Rana Plaza started to function and then claimed the lives of thousands of poor workers. (Reason and responsibility, 2013)

The world was shocked by the reaction of Bangladesh ministers. Prime Minister, Sheikh Hasina, said: “accidents happen.” When number of victims reached 530, Finance Minister, Abul Maal Abdul Muhith, claimed: “the disaster wasn’t really serious.” (Reason and responsibility, 2013) These interviews made clear that the government does not want to support its inhabitants and that employees are in the really vulnerable position.

No doubt, garment workers wanted Sohel Rana and the factory owners to be punished and to take moral responsibility on this tragedy, so many street protests were organized to express pain and ask for justice. To avoid further disorders, Prime Minister Sheikh Hasina gave the order to the police to arrest Sohel Rana and the owners of those factories who based their activity into Rana Plaza. The justice came soon, after 4 days since the collapse, Mr. Rana was arrested, at that moment he was trying to migrate to India in order to escape from prosecution. (Reason and responsibility, 2013)

What are the consequences? No doubt, this tragedy made huge resonance all over the globe and brands decided to take pro-active measures. Corporations, for example, Benetton, paid 1.1 million of dollars to compensation funds but Primark – 1 million of dollars. (After two years, 2015) This money is actually nothing in comparison to the year profit of these companies. Also, Western brands became safety oriented. The Guardian writes: “About 250 companies signed two initiatives, the Accord on Fire and Building Safety in Bangladesh, and the less constraining Alliance for Bangladesh Worker Safety. Both were designed to improve safety dramatically in 2,300 factories supplying western brands. Both complete their terms this year.” (Rana Plaza, five years on, 2018) So, Western brands are concerned about the situation in Bangladesh and try to improve it. Workers agree that situation has become better. For example, Khatun has been working for garment industry since she was 11, in the interview she stated that now the owners of factories care about employees’ safety and take action in case of complains. The reason of such owners’ activity is the risk of being cut off by Western companies, so owners invest their money in safety measures such as making stronger foundation of building by the use of qualitative materials, making fire doors and alarm systems. However, the term of the Accord and the Alliance finishes soon, and workers are afraid that everything will be as it was before the collapse of Rana Plaza as government is corrupted and does not pay attention to workers’ conditions and their concerns are reasonable. “The government is not ready at this time to take over and regulate factories at a satisfactory level,” says Wayss, the Accord chief. The Alliance director, Moriarty, agrees: “It’s still early days for the government.” (Rana Plaza, five years on, 2018)

So, the Rana Plaza tragedy was huge and claimed lives of thousands of workers, thousands were injured. This was a tragic lesson for Bangladesh authorities, factory owners and Western companies which brought the importance of human life and employee’s safety on the new, higher level.

The main arguments for the debate

Position: Western companies and consumers did not have moral responsibility for Rana Plaza disaster.

Argument 1: Western brands made business deal with in Rana Plaza placed factories as with legally operating business agents.

To start with, it should be defined what kind of relationships bound Western companies and in Rana Plaza placed garment factories – and it was supply contract. Western brands (retailers/buyer) in this case had same rights and duties as common end-consumers on the market. It means that Rana Plaza building’s and factories’ owners are the only ones who are responsible for their employees’ working conditions, safety and environment. As long as company follows all of the state legislation/any implemented international agreement rules – it operates legally, so its products are legitim. By this way Western companies had a right to make partnership with Rana Plaza without any doubts of breaking business ethics as Rana Plaza was legally established and operating entity.

As the business entity is considered to be a sovereign subject on the liberal market, (Liberalism, pub. 1996, rev. 2018) no one has a right to influence corporate governance of it and dictate how to run company, how to treat workers, what wages to pay unless there are issues contradicting country’s legislation. In principle, it is impossible for some representative of Benneton or Walmart to interfere and ask for some changes in factories’ strategical management, organizational culture and safety compliance if government does not pay attention.

Dozens of NGO’s and journalists claimed that Inditex, H&M and others, should have done something, at least to pay compensations for the families of dead workers. (Why were Western retailers blamed, 2017) However, Western companies cannot be obliged to do this because those workers were not Western companies’ employees but employees of in Rana Plaza operating factories.

Argument 2: Western companies and consumers were not provided with the information about safety issues in Rana Plaza.

To continue, the duty of a seller (in Rana Plaza placed garment factories) is to provide relevant information about the product they are offering to customer according to the right of a consumer “to obtain necessary and truthful information in order to make a conscious choice among the goods and services offered.” (Consumer rights and protection) Here it is clear that Western brands were not provided with information about mistreatment of factory’s workers, so they could not consider this during decision making-process. This fact is proved by words of the ex-workers of a factory: “A buyer is coming so be alert and be good. If they talk to you just answer like this – you joined at age 18, you get a lunch-break, all is good, all is fine.” (Rana Plaza: are fashion brands responsible, 2015) As Western brands (retailers) were not provided with relevant information about safety issues in Rana Plaza, so they could not inform end-consumers about the situation. As the result, consumers were buying products without any knowledge.

Argument 3: Western brands could not take responsibility due to potential moral hazard problem.

According to Transparency International, Bangladesh has high level of government corruption [rank: 149/180]. (Corruption Perception Index 2018) If Western companies take responsibility of dealing with safety issues, there will be risk of moral hazard as factory owners will continue giving bribes to government and state engineers to receive permission for buildings. Nobody will care about safety environment because factory owners and local authorities will always know that Western companies will be legally and morally responsible for every accident. (Why were Western retailers blamed, 2017) In this way no changes in state’s policies will be ever done to improve working standards, construction standards and work of controlling mechanism.

They would wait for someone coming and saving their citizens instead of taking responsibility for the possible disasters in future. It is unacceptable as according to UN Guiding Principles on Business and Human Rights, the government has the responsibility to protect and promote workers’ rights and the companies have the responsibility to respect these rights. (Des Jardins, McCall, 2014)

The personal viewpoints of the team

There is a certain tendency of making economic achievement bound with social value (Osorio-Vega, 2018) and popularity of corporate responsibility and business ethics is expanding with a huge speed. However, it cannot be taken as a pure benefit of nowadays business environment as there are still case when companies and other global market participants cannot find a consensus and so called codes of ethics and sustainability policies are not really implemented but just exist in a written form. Our team see that the case of Rana Plaza crash is a crucial example of such complicated business world that we have in 21st century. There was no question that someone’s wrong actions caused a huge disaster, but there according to our discussion in previous point, it is clear that Western companies cannot take the fault of this case.

For all of the team members the decision-making process is Western values driven. Our analysis is based on non-consequentialist ethical theories such as ethics of duty and ethics of rights. Considering ethics of duty, asking a question who do Western companies have obligation to in this situation, the answer is obvious: to factories’ owners whom Western brands signed contracts with. So, Western brands do not have obligations to Rana Plaza employees as there is no direct link or contract. Considering ethics of rights, asking a question whose rights do Western companies need to consider here, answer is: rights of direct stakeholders, i.e. business partners (in Rana Plaza situated factories owners), end-consumers, shareholders and employees they signed contract with.

The main reason we do not see Western brands as guilty party is based on well-known stakeholder theory. (Freeman, 2010) From the Inditex, H&M and others side their task was to create value for their supplier as in the case it was their direct stakeholder. Here it can be clearly seen that by choosing to provide employment possibilities for developing regions big corporations wanted to improve economic health of the region. Moreover, investments in human capital and living conditions of citizens of Bangladesh were made possible as there was a non-stop flow of profits that Rana Plaza were guaranteed by supply contract partnership. The problem here is wrong allocation of profits that supplier made, but it cannot be somehow impacted by Western brands as it is internal process of each enterprise.

The guilty party undoubtedly stays Supplier (Rana Plaza factory) itself as it did not comply with “policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates” (Porter, Kramer, 2011, p. 66) that is a basics of CSR (Corporate Social Responsibility). It broke fulfillment of legal and ethical as well philanthropic responsibilities as such. (Carroll, 1991) We also need to add to previous discussion the fact that there was no local citizens (NGO) movement that could fight or was starting to fight Rana Plaza owner illegal actions. In addition, corruption levels were increasing and therefore there was no (resistance on administrative level. (Bangladesh collapsed building owner, 2014) So, the lack of Bangladeshi response during that period of time had unbearable influence on further development of illegal acts. (Islam, 2017)

Overall, we strongly believe that CSR of Western companies in this case should not be questioned, but exactly Rana Plaza owner CSR and ethical behavior should be put under consideration. In our work we tried to emphasize the complexity of the issue that for most of the observers of the case led to wrong conclusions about the guilty party.

Although, we have different backgrounds and experiences there was no disagreement about our collective viewpoint. Undoubtedly, we see ethics from various perspectives but our work process because of that was rich of discussions and opinions. We found it is easy to express our positions and there were no doubts that everyone of us would be understood. For the next time, we certainly see some potential improvements to be done to make our cooperation smoother. For instance, we could meet in different place (not university premises), so the working environment would be more motivational and inspirational, for example, we could have a discussion at open-air or similar.

List of Literature and Internet sources

Literature

Carroll, A. B. The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 1991. pp. 39-48.
Des Jardins, J.; McCall, J: Contemporary issues in business ethics. Cengage Learning, 2014, p. 405f.
Freeman, E. Strategic Management: A Stakeholder Approach. Cambridge University Press, 2010.
Islam, M. Non-governmental organizations and community development in Bangladesh. International Social Work, 60(2), 2017. pp. 479-493.
Osorio-Vega, P. The Ethics of Entrepreneurial Shared Value. Journal of Business Ethics, 2018. p. 1.
Porter, M. E.; Kramer, M. R. Creating shared value: How to reinvent capitalism and unleash a wave of innovation and growth. Harvard Business Review, 89(1–2), 2011. p. 66

Internet sources

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Gomes W. Reason and responsibility: the Rana Plaza collapse. (published 09.05.2013, retrieved from https://www.opendemocracy.net/opensecurity/william-gomes/reason-and-responsibility-rana-plaza-collapse , accessed 19.20.2019)
Hoskin T. After two years, the Rana Plaza fund finally reaches its $30m target. (published 10.06.2015, retrieved from https://www.theguardian.com/sustainable-business/2015/jun/10/rana-plaza-fund-reaches-target-compensate-victims , accessed 19.02.2019)
Hoskin T. Rana Plaza: are fashion brands responsible for those they don’t directly employ? (published 10.04.2015, retrieved from https://www.theguardian.com/sustainable-business/sustainable-fashion-blog/2015/apr/10/rana-plaza-are-fashion-brands-responsible-for-those-they-dont-directly-employ?fbclid=IwAR3JYzOe4HuxrTFQfcrbWmsx_0QA7UudbKC6RBBNkmYS0F5S3oUED4d6wZs , accessed 20.02.2018)
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Rushe D., Safi M. Rana Plaza, five years on: safety of workers hangs in balance in Bangladesh. (published 24.04.2018, retrieved from https://www.theguardian.com/global-development/2018/apr/24/bangladeshi-police-target-garment-workers-union-rana-plaza-five-years-on , accessed 19.02.2019)
Thomas D. Why Won’t We Learn from the Survivors of the Rana Plaza Disaster? (published 24.04.2018, retrieved from https://www.nytimes.com/2018/04/24/style/survivors-of-rana-plaza-disaster.html , accessed 19.02.2019)
Transparency International. Corruption Perceptions Index 2018. Bangladesh. (retrieved from https://www.transparency.org/country/BGD , accessed 20.02.2019)

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